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NDAs – Do they need to be regulated?

The Financial Times reported on 10 August 2021 on the NDA boom and that as between employers and workers, NDAs can stop important information on fraud or mistreatment from reaching the public. This is a reminder of considerations as to the regulation of NDAs.

In 1981 the Law Commission recommended, “that the present law on breach of confidence, whether it be based on principles of equity or of common law, should be abolished and replaced with a new statutory action for breach of confidence”.  This was not done, and more recently the UK decided not to implement the whole of the EU Trade Secrets Directive on the basis that the common law satisfied the substantive parts of the Directive.

As between businesses which are negotiating an NDA, I do not see any need for additional legal measures to protect one side or the other.  There is no shortage of legal advice, and specialist lawyers know what needs to go into a confidentiality agreement. Although it no doubt goes on, we do not see much (if any) advantage-taking in our day-to-day work.  In most cases, there is a mutual desire to sign the NDA as quickly as possible so the parties can get on with the important work of discussing their deal.  Nevertheless, NDAs are more complex and nuanced than some people realise, and solicitors are well-advised to bear in mind the SRA’s updated NDA warning notice published in November 2020[1], even when negotiating and drafting B2B agreements.

The controversy of course surrounds the need to regulate the over-bearing use of NDAs between businesses and individuals. The Harvey Weinstein case is on point, but so was the inappropriate use of NDAs exposed by the FT in its coverage of The President’s Club Dinner scandal in 2018.  The law already provides some statutory protection for whistle blowers in the Employment Rights Act 1996 (as amended) and the law limits the extent to which duties of confidentiality and contractual obligations can be used to prevent the disclosure of immoral or illegal conduct.  The 1996 Act renders void any provision in an agreement to the extent that it precludes a worker from making a “protected disclosure”. It is moot whether this is sufficient, and there may well be a case for another review of the law.

In my view, the underlying issue is more about the administration of justice than the substantive law as such.  This begins with regulation of the process in which an NDA is concluded.  The SRA reminds solicitors of their responsibilities in the following terms:

“Your duty to act in the best interest of your client does not override your professional obligations to uphold the proper administration of justice, act in a way that maintains public trust and confidence, and to act with independence and integrity. If your client’s instructions are to act in a way that is inconsistent with our requirements, you will need to consider whether you can continue to act for them.”

This position is unarguable and sets a heavy burden – it will take a strong lawyer to stand-up to the likes of Weinstein, however many years they have under their belt. However, this form of governance can only go so far. Questions over legal aid and the cost of legal representation need to be included in the mix as well.

Andrew Scott


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